Forum Rules (Everyone Must Read!!!) (updated: 04/28/2015)

Welcome to the Bankruptcy Forum. Bankruptcy (BK) Forum is known as and will be referred to as BKF hereinafter. In order to ensure a long term success of our vibrant community, we have established certain rules and guidelines to which everyone must adhere to. Please take your time to carefully read our rules, before you start to participate in the community.

Things you agree to do: (BKF) users agree to use the search function before starting a new thread. This prevents duplicate discussions and allows for better organized topics.

All BKF users agree to read the sticky posts which may be available at the top of a forum page. These Sticky posts often contain valuable information. They may also outline more rules and guidelines specific for that particular forum, stickies are put in place by that forums moderator(s) or admin(s).

Things you agree not to do:

All BKF users agree not to call people names or write a post simply to make a personal attack, or get a negative reaction; this behavior is not allowed on our forum. The use of derogatory language aimed at anyone will be severely dealt with. There is no need to agree with each other, or to even like each other. However, by signing onto you agree to treat each member and guest with the respect they deserve. No threats or personal attacks will be allowed.

All BKF users agree not to discuss, engage, or encourage any behavior or activity which violates the law. Discussion of drugs, violence, murder, theft, vandalism, fraud or any other issue which could be used to help individuals break the law is strictly forbidden.

All BKF users agree not to "bump" old threads, unless there is a specific benefit to the community by doing so. But in most cases, please don't post in very old threads, instead start new threads.

All BKF users agree not to attempt/use another members account. It is against BKF rules to use any account other than your own. Impersonating another member will result in an immediate ban. It is also against the rules to open more than one account in your own name without permission from a moderator or administrator. If you have been banned for any reason, it is against the rules to open another account. If you were banned temporarily and you are caught using another account you will be banned permanently. Choosing a moniker which is similar in either sound or spelling as a moderator or administrator is strictly forbidden.

All BKF users agree not to private message any moderator, admin, or other member with questions related to their personal circumstances (Questions about the forum or issues with the forum are ok). This forum only works when members share their experience and insights with everyone.

Things you agree not to post:
All BKF users agree not to post any derogatory/racist/or sexist remarks. This includes attachments, links and all information contained within posts, signatures, and avatars, failure to comply with this rule will result in a permanent ban.

All BKF users agree not to post any copyrighted or trademarked information without the express written permission of the owner(s) / proper citation of source.

All BKF users agree not to post any real names, addresses, telephone numbers, email addresses, social security numbers, or any other personal details (their own or other people's).

All BKF users agree not to post links, pictures, attachments, videos, or the like of pornographic content, objectionable material or extreme violence, whether cartoon or real.

All BKF users agree not to use BKF for advertising purposes without a written contract between yourself/company/agent and the administration of BKF. Blatant advertising will result in a ban.

All BKF users agree not to spam the forums. Spam includes but is not limited to posting erroneous, non-relevant-useless, off-topic, or meaningless posts. Spam may also include posts which contain no text, or large areas of blank space between lines. Simply posting emoticons without text is considered spam. BKF is the largest bankruptcy message board and all the content is intended to help other users. Please help us improve the quality of our forum by making sure that your posts are well-worded, spell checked, grammatically correct and syntaxed.

Regarding actions of moderators and administrators:

The forum is no place to air out your opinion or be judgmental of our staff and its capabilities.

All BKF users agree not to abuse or mistreat moderators or administrators. It is against BKF rules to post any information regarding bans or any other action taken by a member of the moderating or administrative team. If you wish to discuss bans or warnings please do so via PM. To place a complaint against a moderator, send a PM to a super moderator. All Moderators are equal, any decision made by a moderator must be adhered to. If a moderator tells you something you do not like, do not go to another moderator looking for a different answer. If you are caught doing this you will be banned. The moderators work as a team and respect the decisions made by their peers and will help enforce them unless an administrator tells them differently.
If you have an issue with how the forum is run, then notify one of our administrator and we will look into the situation. We have in the past and still do appreciate any input that you offer this forum. But critical input and/or judgmental postings towards the staff will result in you getting banned.

Should you find a thread offensive or out of line, then notify a Mod in a PM so they can evaluate the situation and do the action deemed necessary.

All moderators do have active "other" lives outside of the forum and help moderate this forum in their spare time throughout the days and weeks.

If you have a problem with a member or Mod follow the proper channels of reporting it.

BKF reserves the right to delete any posts which contain anti-BKF comments or discussion. Any bashing of moderators or administrators, or any of their discussion or actions will also be deleted, and the responsible posting party(s) will be banned. Any public anti-BKF advertising, communication, or posts on another forum will result in permanent bans as well.

All warnings and bans are decided by individual moderators and administrators. Warnings are preferable to bans however, for serious offenses and repeat abusers bans will go into effect. The length of the bans can vary from several hours to permanent.

All messages posted or sent including through PM are the property of

All BKF users agree not to advertiser on the forum (Niether by posting, private messaging or using your signature). If you are a company/attorney/legal adviser wishing to advertise on the site or sell a product, you must contact the head administrator and inquire about our advertising packages.

All bankruptcy related opinions expressed on are those of their authors and not necessarily of BKF, its staff or representatives.

You agree not to copy any material/post/content from BKF without written permission from our head administrator .

By posting on this forum you agree to these terms and conditions, including any punishment deemed appropriate by moderators or administrators in the event of an offense.

Administrators/Moderators can change these rules at any time without prior notice.
See more
See less

Losing job and 401k

  • Filter
  • Time
  • Show
Clear All
new posts

  • Losing job and 401k

    I may be losing my job in a couple of weeks and if I do I would have to draw from my 401k account to live on. Will this be a problem?

    I had my 341 last week and I would have about $16,000 to draw from on my 401K. Would the trustee try to cease it, I wouldn't have any income so this is my only source to pay bills until I find another job.


  • #2
    First, do you think you are going to be fired or are you being laid off? If you are being laid off you will be receiving unemployment plus possible severance to live on. Plus you state "may" so until you have that pink slip in hand, you are still working. First, taking out 401(k) money is always the worst thing you can do cause you will be subject to state and federal taxes (20% plus) and also a 10% penalty on what you withdraw (on your federal return for the year withdrawn). So 30% or more of your funds are basically eliminated right off the bat which you could leave in there and continue to save for the future. It is your money to do with whatever you want but realize the consequences.
    Filed 5 Year Chapter 13: April 2002
    Early Buy-Out: April 2006
    Discharge: August 2006

    "A credit card is a snake in your pocket"


    • #3
      i agree with flamingo ....unfortunately we used up our 401....which would have been protected in the bk....although it went for living and moving expenses, we certainly could have found a better use for it in our future...don't touch'll be surprised at how you'll be able to manage.

      best of luck to you!
      8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! and all are welcome to bk forum's Florida State Questions and Answers on BK


      • #4
        I agree. I could kick myself because I also used up my 401k after my severance ran out, thinking I would find a job long before it ran out. Not only did I lose some to taxes, but unemployment calculated it as income and delayed my claim until they figured I'd spent it down. So, it was definetely gone.

        That was in early 2009. Since then I've had two temp jobs and that is it. How I wish I would have known that I would eventually be filing bk because it would have been exempted and still be available if I absolutely needed to use it.

        Use up your unemployment before you even think about dippid into your pension. Once it is gone, it is gone and there is no liferaft left.


        • #5
          We used up 'Hub's 401k also trying to stave off the inevitable (bankruptcy) and got hit with all of the tax penalties, etc. that go with it. There's nothing like another kick to the head when you are on your way down--and this was self-inflicted.
          "To go bravely forward is to invite a miracle."

          "Worry is the darkroom where negatives are formed."


          • #6
            Originally posted by AngelinaCat View Post
            We used up 'Hub's 401k also trying to stave off the inevitable (bankruptcy) and got hit with all of the tax penalties, etc. that go with it. There's nothing like another kick to the head when you are on your way down--and this was self-inflicted.
            pass that BOOT!!!!!!!!!!
            8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! and all are welcome to bk forum's Florida State Questions and Answers on BK


            • #7
              A 401K or IRA is exempt (up to around $1M), so that is not an issue. However, once you would take a distribution, the cash would not be exempt anymore, unless you could plausibly say that it was being rolled over.

              The thing to do is to do a transfer of the 401K amount to an IRA. The cash goes directly from the 401K administrator to the IRA custodian, and there is no 20% taken out. (NOTE to Flamingo, the 20% is simply the amount of tax that is withheld, and would be refunded after filing the tax form, although perhaps the trustee could get his greedy little fingers on it.) Once the cash is in the IRA, you can take an early distribution, which would trigger a 10% penalty in addition to any tax for the distribution as income (if the IRA is a traditional "pre-tax" IRA with no post-tax basis.) After the filing, I took a distribution from my Roth (with no 10% penalty as the conversion to that Roth was 5 years old) and then $10K from my traditional (as well, with no 10% penalty, since I had just purchased a home after not being a bonafide homeowner for over 3 years- (i.e., new homebuyer.)

              Don't let folks try to steer you away from taking a distribution if you REALLY need it. First, you should apply for the unemployment assistance - it's what your employer's taxes have already pad for! If you're down to nothing in the bank, you can easily get on food stamps. I've been on food stamps off and on for quite some time, and I've learned to cook ribeye steaks that I buy with the food stamps. You could probably get Section 8 housing assistance as well.


              • #8
                I would pay attention to Flamingo's advice. If you go through the hoops outlined above to transfer to an IRA, it doesn't really change anything. At the end of the year you will owe a 10% penalty plus taxes on the money you took out, the amount of which to be determined by your tax bracket. For 2011 singles are taxed at 15% up to 34500 of taxable income and 25% on the amount over that up to 83600. If you are married the 15% bracket goes to 69000 and the 25% bracket to 139k. So my guess is that any money you take out of either your 401k or a rollover IRA will be taxed at 15% plus the 10% penalty. Plus any state taxes. Hopefully unemployment and maybe some severance will tide you over until you find another job. One other point to consider is that you have already filed so you are in a much different boat than some of the folks above who listed their experiences. Good luck.
                Also after your 341 you shouldn't have to worry about the trustee. as someone said your 401k is exempt so it will never be subject to being taken by the trustee.


                • #9
                  truely distubing thought if someone does not understand how to handle their retirement funds...
                  8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! and all are welcome to bk forum's Florida State Questions and Answers on BK


                  • #10
                    Downsize, downsize, downsize, before you take out money from your 401(k).

                    To JackBondLove, the real problem is most people, in the depths of financial crisis cannot distinguish between NEED and want. It sucks that the OP lost their job. But it sounds like they will get unemployment, so the first task is to downsize, not take a 401(k) withdrawal. Unfortunately, with the rise of lack standards, too many people treat the 401(k) as a bank. There was a time when you couldn't touch the 401(k) except for the most extreme emergency.


                    • #11
                      Part of the reason I took mine out when I was let go was because it was losing a $1000 a month - back when the market got so bad. I didn't realize I could just have them go for the safest plan and I got scared. Also, for me, even though I THOUGHT I knew how to downsize, it took a while for me to really catch on that I was not going to find a comparable job - or ANY job and it wasn't until reality roared its ugly head that I re-learned how to live on less.

                      Sometimes I feel as if I am regressing back to the time when I had my first apartment (and I'm 57), mostly it has been a wonderful re-learning experience and I'm amazed at how far I can stretch things and do without. I actually can't imagine going back to living a higher life style anymore. I have fun now trying to live frugally.

                      BUT - it is a reality shock and not easy to do at first. It is what is necessary to do, just not always easy to learn quickly.


                      • #12
                        Originally posted by tez44xx View Post
                        I may be losing my job in a couple of weeks and if I do I would have to draw from my 401k account to live on. Will this be a problem?

                        I had my 341 last week and I would have about $16,000 to draw from on my 401K. Would the trustee try to cease it, I wouldn't have any income so this is my only source to pay bills until I find another job.

                        Before this thread gets any longer, we need to know the answer to this VERY IMPORTANT question:

                        Are you an Independent Contractor? If so, then most of the above replies need to be revisited--except for those saying NOT to touch the 401K. We have been assuming from what you wrote, that you are in a conventional employee/employer situation. Please clarify.

                        "To go bravely forward is to invite a miracle."

                        "Worry is the darkroom where negatives are formed."


                        • #13
                          Thanks for all your replies.

                          I am not a contractor. I may be losing my job because of a prolonged medical condition that causes me to lose a lot of work. If I am terminated I am not sure I would qualify for unemployment due to the medical condition. Social Security Disability for my medical condition takes a minimum of 2 years so I would not have any income to support myself. My 401 would be my only source of income until then.

                          My question is how the bankruptcy courts look at a distribution if you have no other income during the 60 day wait before discharge and the 180 days after discharge.. Would the trustee try to take the money if I cash it out.



                          • #14
                            Once discharged and closed your financial affairs are your own business. The trustee would have no claim on any money from the 401K


                            • #15
                              I have been told that while technically the 401k is part of the bk estate, because it is exempt,as a practical matter you can be safe in using it if need be while awaiting discharge. Seems to make sense to me. I've also been told no you can't. I've also been told that you could petition the trustee for an ok to use. So my guess is that it all comes down to your trustee and your situation. If you are a no asset case and have already received a report of no distribution I would feel comfortable (as much as one can be in this situation) using it. But if i did use it, I'd dole it out in small amounts just in case there was an issue.
                              Good luck.


                              Unconfigured Ad Widget